Follow BeltwayBlips on Twitter
vote down
flag
yglesias.thinkprogress.org - 2/1/2009
—
By Matthew Yglesias
Megan McArdle writes about a potential problem with stimuli:
The real question, I think, is how close the permanent income hypothesis is to being true. The basic idea is that people are forward looking , and they try to smooth their consumption over time. So if you ...
Comments
Blog Reactions
How forward looking are we?
Megan McArdle —
Meanwhile, also in response to my post on the permanent income hypothesis, Matt Yglesias writes that it isn't true. I think that's right--or rather, that it isn't perfectly true, and that its trueness varies across time. Peoples' ability to project their future income varies, and so does how much focus they put on projecting that income, relative to current flows. It wouldn't necessarily bolster the case for stimulus to assume that people will not correctly estimate the costs--people could overshoot as well as undershoot, meaning that they'd actually oversave to pay for future taxes. What matters is, first, are people paying more or less ...
Related: permanent income hypothesis
